1. Good Faith Estimate (GFE) and HUD Settlement Statements (HUD-1) Forms
Starting on January 1, 2010 the familiar GFE and HUD 1 forms will be redesigned and there will be substantial changes as to what is to be disclosed for all Long Island Mortgage closings or any mortgage in the country. Click here to see copies of the new forms. Here are the highlights of the changes:
- All lenders will be required to disclose fees in the same manner
- Loan feature information has been added to the forms
- All lender and mortgage broker fees will be combined and shown as a single amount (fees paid by lenders, property sellers or builders and fees paid outside of closing will be included in the total settlement charges)
- A reconciliation of the GFE to the HUD-1 will be required
2. Settlement Service Provider List
Lenders will be required to provide the borrower with a Settlement Service Provider List that includes service provider names. This pertains to any settlement service where the service is required but the borrower can select a provider – for example: title, pest and septic inspections. In addition:
- The list must include providers available in the local market
- If the borrower selects a service provider from the list, the lender will be subject to certain fee tolerances (See #4 below for a list of fee tolerances) for the charges associated with that provider
- If the borrower selects a service provider not on the list, the settlement service is not subject to the tolerance
3. Re-Disclosure Restrictions
Lenders will be bound to fees disclosed on the initial GFE, except in certain situations where there are "changed circumstances" associated with a loan.
- Changed Circumstances:
<!--[if !supportLists]-->o If a changed circumstance occurs, only those fees tied to the changed circumstance may change<!--[endif]-->
<!--[if !supportLists]-->o If the estimates within the GFE are inaccurate but no changed circumstance occurs, the lender is bound to the amounts shown on the last disclosed GFE<!--[endif]-->
<!--[if !supportLists]-->o If a changed circumstance occurs, the lender must re-disclose with 3 business days after receipt of the information regarding the changed circumstance or the ability to re-disclose and change a fee is lost<!--[endif]-->
<!--[if !supportLists]-->o Lenders must maintain the documentation regarding the changed circumstances for 3 years<!--[endif]-->
- The definition of "changed circumstances" include the following:
<!--[if !supportLists]-->o Acts of God, war or disaster<!--[endif]-->
<!--[if !supportLists]-->o Changes or inaccuracies in information relating to the borrower or the transaction that was relied upon in providing the GFE<!--[endif]-->
<!--[if !supportLists]-->o Changes to the loan amount, loan program or value of the property<!--[endif]-->
<!--[if !supportLists]-->o New information regarding the borrower or transaction unknown when the GFE was originally signed<!--[endif]-->
<!--[if !supportLists]-->o A rate lock or an extension or expiration of a rate lock<!--[endif]-->
4. Fee Tolerances
In an effort to improve the accuracy of the settlement charge information provided to borrowers, new restrictions will be placed on lenders regarding how and when fees disclosed on the GFE may change. Changes to settlement charges between the final GFE and HUD-1 will be defined in three categories:
1. Charges that cannot increase at settlement:
<!--[if !supportLists]-->· Origination charges<!--[endif]-->
<!--[if !supportLists]-->· Discount or premium points for a specific interest rate selected<!--[endif]-->
<!--[if !supportLists]-->· Adjusted origination charges (after lock)<!--[endif]-->
<!--[if !supportLists]-->· Transfer taxes<!--[endif]-->
2. Charges that cannot increase in the aggregate by more than 10% at settlement:
- Required settlement services that the lender selects or if the borrower uses a company on the Settlement Services Provider List
- Title and title insurance(if selected by the lender or if the borrower uses a company on the Settlement Services Provider List)
- Government recording charges
3. Charges that can increase at settlement:
- Required settlement services chosen by the borrower not on the Settlement Services Provider List
- Title and title insurance services chosen by the borrower not on the Settlement Services Provider List
- Daily interest charges
- Homeowner’s insurance
Everybody that closes a Long Island Mortgage or nay place across the country should familiarize themselves with the new forms and the changes that result. Keep in mind this will apply to all loans that close after January 1, 2010. It does not matter if the application took place before January 1 or was locked or registered.
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